Small Cap Value Report (Thur 26 Sep 2019) - VLE, GOCO, NTBR, PTRO, EQLS

Thursday, Sep 26 2019 by

Good morning folks,

I'm feeling slightly better off this morning, after numbers from Volvere (LON:VLE). But there are plenty of other stories to discuss, and I haven't forgotten about stories missed on Tuesday. 

Volvere (LON:VLE)

  • Share price: 1250p (+9%)
  • No. of shares: 1.8 million
  • Market cap: £23 million

Half-year Report

(In case anybody was not aware, I have a long position in VLE.)

Volvere has published some decent interims - happy days.

This is an investment company which currently has just a single operating subsidiary, Shire Foods, after all the other subsidiaries were sold for handsome profits.

Shire, in Leamington Spa, seems to be doing nicely. I attended Volvere's AGM this year, and reviewed my notes from it this morning. At the AGM, Volvere management talked about Shire's capacity constraints and its expansion push in terms of production lines and cooking vessels.

The H1 revenue increase at Shire is even better than I would have hoped for, at 39%. This helped to offset margin pressure from raw materials and wage inflation. The overall jump in Shire's adjusted PBT was from a £170k loss to a £240k gain.

Shire supplies frozen food to discount supermarkets, and this is a nice sector to be in right now (e.g. Aldi expansion).

As far as developing its product portfolio is concerned, Shire is focused on the vegan segment - another growth area:

We are actively responding to the increased demand for vegan products and have agreed several new products with retail customers.  In addition, we have launched our own brand - Naughty Vegan - into the foodservice market.

Time for a few calculations.

Last year, Shire produced an adjusted PBT result in H2 of about £1 million (based on a £170k loss in H1 and an £850k profit for the full year).

If it matches that this year, it is on course for adjusted PBT of £1.24 million. But given the strength of H1 this year, the end result could (should?) be materially better than this. Maybe £1.5 million is a reasonable guess. Volvere says that additional opportunities…

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All my own views. I am not regulated by the FSA. No advice.

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Volvere plc is a holding company. The Company identifies and invests in undervalued and distressed businesses and securities, as well as businesses that are complementary to existing group companies. It operates through Food Manufacturing segment. Its food manufacturing segment consists of the Company's subsidiary, Shire Foods Limited (Shire), which is engaged in manufacturing frozen pies, pasties and other pastry products for retailers and food service customers. more »

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Goco Group PLC, formerly Group plc, is a holding company. The Company's principal activity is providing an insurance price and product comparison Website. Its segments include Insurance and Strategic Initiatives. It operates a United Kingdom-based price and product comparison Website, offers an online service that enables consumers to compare the prices and features of products. The comparison services provided under the Insurance segment include over 400 brands and are split into three categories: motor, property and other. The Company operates its own Website platform for car, motorbike, van, home and pet insurance comparison services, displaying a range of products offered by its panel of insurers. The products compared under the Strategic Initiatives segment include over 250 brands and are split into three categories: money, home services and other. The Company's subsidiaries include Finance Limited and Limited. more »

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Northern Bear Plc is engaged in providing specialist building services. The Company operates in the support services sector. The Company's segments include Roofing activities, which provides a range of roofing services, including slating, tiling, leadwork, felting, refurbishment and maintenance for domestic, commercial and public sector properties; Materials handling activities, which includes supply, service and maintenance of fork lift trucks and warehouse equipment both on hire and for sale; Building services activities, which provides services, including fire protection and asbestos removal, and Corporate and other activities, which provides head office activity and consolidation items. The Company also provides services ranging from general building work, asbestos surveying, fork lift truck sales/hire, and health and safety consultancy. The Company's subsidiaries include Isoler Limited, Springs Roofing Limited, Wensley Roofing Limited and Jennings Properties Limited. more »

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  Is LON:VLE fundamentally strong or weak? Find out More »

39 Comments on this Article show/hide all

Graham Neary 26th Sep 20 of 39

In reply to post #516816

Hi Richard, thanks for the suggestion re: Equals (LON:EQLS). Am looking at Northern Bear (LON:NTBR) too. Also for completeness: well done on £VLE!

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threeputt 26th Sep 21 of 39

In reply to post #516866

ah Graham I see you fell for the £ trick too :) I'm curious however how you got EQLS & NTBR to work but not VLE ? If it's an intermittent fault then I feel for Ed & his development team !

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sharw 26th Sep 22 of 39

In reply to post #516871

Graham's Volvere (LON:VLE) ! didn't work because he did not put a space after thus: £VLE!

Now I've switched to the new version and will write £VLE  QED.  Incidentally, for those on PC/laptop with address bar the quickest way to move between versions is to overwrite www with app and vice versa.

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Desanj 26th Sep 23 of 39

Hi Graham,

would you be able to review Hardide (HDD) today please?

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hayashi22 26th Sep 24 of 39

Titbits or tidbits that is the question.........some say one some the other

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Graham Neary 26th Sep 25 of 39

In reply to post #516876

You are correct. Volvere (LON:VLE)

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Graham Neary 26th Sep 26 of 39

In reply to post #516896

But only one of them is correct!

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Graham Neary 26th Sep 27 of 39

In reply to post #516891

I have a lot to get through, let's see how late I stay in the office. G

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sp2018 26th Sep 28 of 39

Graham, regarding Goco (LON:GOCO) and their Weflip and Look After My Bills services.

I've looked at them myself before and what put me off from signing up is the way they calculate savings when deciding to switch to a different supplier...

Based on Weflip website
How do you calculate how much I’ll save?
We calculate your saving by looking at how much you’d spend over the next 12 months if you were to stay with your existing supplier.

This means if you’re on a fixed tariff which is coming to an end, we assume you'll stay on the plan until its end date, and then roll onto your supplier’s Standard Variable Tariff for the remainder of the 12 months. Then we compare that to what you’d pay if you flipped today. That’s how Ofgem (the energy regulator) asks us to do it.

So, if you have 30 days left of your current tariff when we run a comparison, we’ll calculate how much your usage will cost over 30 days on your current tariff and 335 days on a standard variable tariff. We then compare this to annual costs on other tariffs.

How often will you switch my energy?
Usually once a year, and only when we find an energy deal that’ll save you £50 a year or more (after any exit fees)6. But if we find a deal that’ll save you money sooner, we’ll make sure you get it. Just not within three months of your last switch.

Assuming that they switch everyone to a 1-year fixed-term tariff on day 1, after 3 months into the
contract any other tariff from a different supplier will most likely be "cheaper" because of the way the savings are calculated (even if the new tariff itself was more expensive).

This sounds like a perfect deal for Goco (LON:GOCO) itself, as they are going to be paid for every switch, but not sure if their customers will like it as much. Is it possible that the number of customers of those services will drop after the first few switches?

Seeing the numbers today I'm trying to convince myself to buy Goco (LON:GOCO) but would feel more comfortable with value of the service if the algorithm of switching was different.

Interested to find out what you/other people think.

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ed_miller 26th Sep 29 of 39

In reply to post #516871

Regarding use of '£' sign for company hyperlinks:

1) It doesn't work unless immediately followed by a space (- hence £VLE! didn't work for Graham, though his others did).
2) It doesn't work where tickers include numbers, e.g. D4T4 or TM17
3) It doesn't yet work on the new site, at least for some operating systems, apparently (or so I'm told, since I'm still using the old site - will probably switch over when the chart signals stuff becomes available on the new site).

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FREng 26th Sep 30 of 39

In reply to post #516921

Fowler (1965) says:  "The older spelling is tid- but it is much less usual in Britain (though not in U.S), and the significance of tid is so doubtful, that there is no case for reverting to it. To make the two parts of such words rhyme or jingle is a natural impulse that need not be resisted unless it involves real loss of meaning."

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tomps3 26th Sep 31 of 39

If you're interested in waste management, plastics, recycling and energy from waste. Take a look at the Biffa Capital Markets Day overview. (Just 13 minutes).

This coveres, waste collection. Plastics. And Energy from Waste.

All hot topics. It's a strong market driven by Government legislation.

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purpleski 26th Sep 32 of 39

I held £VLE for a couple of years and sold recently for a compound annual return over two years of 15.8%.  For me it was a steady performer but it is never going to shoot the lights out and I need my stocks to generate more than 15% in return for the effort, time and of course mental uncertainty of picking ones own stocks.

If I am going to settle for 15% then it would make more sense to put the money with Smith, Train, Ashworth-Lord, Buffett and Yiu and to quote a children’s programme from when I was young and:

“...Just Switch Off MyTelevision Set and Go and Do Something Less Boring Instead”

I am being tongue in cheek as I do enjoy the process and the mental exercise that goes with investing and, at the moment,  the results but supporting a family from your investment nouse is stressful. 

I would be interested Graham to understand whether £VLE is at the bottom of your returns expectations or am I being overly ambitious and I should just put my money with the above Fund managers!! :-)  

I am at the moment exceeding the 15% and there are plenty of PI’s on Twitter way ahead of my returns. 

Thank you.



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Splode 26th Sep 33 of 39

Volvere (LON:VLE) floated nearly 17 years ago and in that time it has only bought interests in five companies (of which four have now been sold). The last one it bought was Impetus Automotive four years ago. 

The company does need a healthy cash pile because when it sees an opportunity is has to jump quickly, typically I believe in less than a month often to buy a company near or out of Administration. But the company's cash pile of £19m seems excessive and using external debt to fund its remaining asset does not make sense to me. This issue comes up in Jon Lander's (infrequent) company presentations but he just says he needs all the cash "just in case". I once suggested he should pay a dividend or one-off special - he just laughed. 

 (Disclosure : I sold out soon after Sira Defence was sold in May.)

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Graham Neary 26th Sep 34 of 39

In reply to post #516931

Thanks for the insight on Goco (LON:GOCO).

Surely the point rests on what they mean by "coming to an end"? ("This means if you’re on a fixed tariff which is coming to an end...). After 3 months, is your contract "coming to an end"?

The other thing is about Ofgem. If they are doing it the way they are supposed to do it from the regulator's point of view, then maybe there is no alternative that is better? Happy to learn more about the details of this.


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jonesj 26th Sep 35 of 39

In reply to post #516976

Volvere (LON:VLE) floated in 2002 and if my calc is correct, the compound annual share price growth since then has been approx 16%.
Many of us have exceeded 16% in the last 3~4 years when markets have done well, but doing that all the way back to 2002 is a very good result. The share price is also underpinned by assets.

If this gets the same 16% CAGR over the next 17 years, my only regret would be not buying a lot more.

I hold some at the moment and may well increase the position at some point.

However, I do dislike the large bid-offer spread & am trying to figure out how to reduce the loss from that. 

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sharw 26th Sep 36 of 39

In regard to Northern Bear (LON:NTBR) Graham says:

"...However, according to the StockReport, the free float is only 26%. I wonder how this was calculated?
If you check the Annual Report for 2018, you'll find that the largest five shareholders had about 32% of shares between them, which is roughly in line with the latest figures on the register that I can see. So I'll stick to the view that there is plenty in the free float, until I'm corrected

On the company's website it states " In accordance with the AIM Rules (Rule 26), in so far as the Company is aware, the percentage of the Company’s issued share capital not in public hands was 32.8% at 30 June 2019". So that's Graham 1 Stocko 0.

As far as I am concerned as a holder one of the problems not helping the share price is that there are no (declarable) institutional investors on the register who might demand presentations so communication is minimal. On the bulletin board in another place, as they say, this has been a frequent moan over the last few years and today davidosh (I suspect the same as carmensfella here) posted:

"I have repeatedly asked the company to do a presentation at one of the Mello events and there is one coming up in November but they have refused to engage so they stay completely under the radar on a p/e of 4 or 5".

Assuming he ends up with a decent number of shares, the key question for me is whether Jeff Baryshnik, although now investing as an individual, will behave as the institutional investor that he was at Citadel and demand that the company raises its profile.

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rmillaree 26th Sep 37 of 39

Northern Bear (LON:NTBR)
For example, if you check the historical record, you'll see that NTBR has itself been unprofitable for 3 out of the past 10 years.

Silly question other than hard work is there any easy way to go back further than the stockopdia numbers show? on the summary sheet.

I might be wrong but i think ignoring "historical" goodwill impairments/woffs NTBR has actually been profitable  every year for the last 10 years (omg is it over 10 years since the last recession shhh) (2017 2011 2010 being 3 years where they have goodwill adjusts) - so i would say they have proved themselves to be  a rock solid unit of a company  ignoring the elephant that is  the fact there has been no recession in that period

silly question 2 - are stockopedia profit numbers listed always done after exceptionals?  

So they have probably delivered £14 mill+ of real cash profits in that period after tax and they are still only value at £5 mill. Having said that have paid out material sums for acquisitions over that period so its not quite as good as it would have been if it was 100% organic earnings.

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sharw 26th Sep 38 of 39

Graham found difficulty in understanding what it is that Pelatro (LON:PTRO) does. So did I until I watched this video:

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jonesj 26th Sep 39 of 39

In reply to post #517021

I also didn't entirely understand what Pelatro (LON:PTRO) do after hearing them make the almost same presentation at Mello in Nov 2018.

However after considering the differences in the phone markets, perhaps I come closer to understanding where it might work:

1 In the UK most of us are content to have phone contracts or buy bundles and forget about them. Something perfectly OK can be had for £7 a month, which we can easily afford and we don't want any other marketing.

2 Pelatro seem to be selling in poorer countries. From what I have seen on the ground in countries like The Philippines, Thailand, Vietnam etc. many of the customers can't afford to go out and pay for a contract or a simple bundle. So they buy a very cheap package for 1 day, or 7 days, which is barely adequate for their needs.  There then follows a marketing game, where the phone companies have a range of tariffs and offers as they desperately try to upsell the customer.
We wouldn't want the hassle, as we find a tariff and it's affordable.

The most obvious example of targetted marketing I had was in Thailand on holiday. I got a text message from the Thai phone company offering me a special offer to go postpaid, on that day only, on the 4th floor of a shopping centre. Thinking I was on the 4th floor, I looked up and their stand was directly in front.  Now that's targetting & relevant !   Particularly as I didn't get any such offer at any other time during the trip.
Incidentally, Pelatro did NOT have a contract with that phone company, so there must be other sources for smart campaigning.     Google bought up loads of them when I looked earlier in the year.

Disclosure: No position and no intention to add one. 

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 Are LON:VLE's fundamentals sound as an investment? Find out More »

About Graham Neary

Graham Neary

Full-time investor and independent analyst. Editor at Cube.Investments, small-cap writer at Stockopedia. Previously a fixed income analyst in the City and institutional fund manager. I'm a CFA charterholder and have the Investment Management Certificate and STA Diploma in Technical Analysis for good measure. When I'm not talking about finance, I enjoy recreational poker, chess and Mandarin Chinese. more »


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